CL Options

Discussion in 'Commodity Futures' started by MJ888, Jun 10, 2009.

  1. MJ888


    I am relatively new to crude oil options. I am considering shorting a September 80 call for a premium of 2.40 ($2,400). This option expires August 17th but as oil moves higher and higher, I am curious to know what will happen to my option should it expire with September CL trading above $80.

    Should I be exercised, will I then be short one September CL futures contract from $80? Since I got a credit of $2,400, wouldn't my trade still be profitable until September CL goes above $82.40?

    Or does CL options operate differently.........:confused: :confused: :confused:

    I am not asking for an opinion as to where CL is headed. Just want to know how CL options work.
  2. If you sell the option and remain short at expiry you will be assigned a short Sep future if the call is in the money at settlement on that day. If the call goes in the money and the buyer wishes to exercise prior to expiration you could be assigned a short position sooner than that. Your break even would be 82.40 less transaction costs, yes.